MetLife wins support amid probe

DavidWeidner

NEW YORK (CBS.MW) -- One day after MetLife disclosed a government investigation of one of its subsidiaries, Wall Street has remained calm, even pleased, with the outlook for the big insurer.

Analysts pointed out that the Securities and Exchange Commission's probe deals with technology systems and controls at one of its subsidiaries, and they lauded New York-based MetLife
MET, +1.51%
for alerting authorities quickly.

"While this investigation and the system glitch are disappointing," said A.G. Edwards analysts Tanya Lewandowski and Jeffrey Hopson, "we continue to view the company's operating fundamentals and earnings prospects favorably."

MetLife also said it expected to take a charge of $3 million to $11 million in connection with reconciling as many as 6,000 customer accounts related to the probe.

The accounts are at New England Securities, a sister company to New England Financial, which announced its own earnings surprise on Monday -- a $31 million charge related to improperly booked expenses.

Adding to the bad news, MetLife said New England Financial's president, Thom Faria, has left the company. Analysts say two other top executives at the unit were also forced out.

In midday trading, shares of MetLife were up 46 cents, or 1.6 percent, to $29.21.

Analysts say the reason for the quiet response to two surprise charges and a regulatory investigation is the scope. MetLife is valued at $20 billion and has posted net income of $916 million in the first half of this year. By contrast, the company will take up to $42 million in pre-tax charges for both restatements combined.

The insurer also has won points for being forthcoming.

"Met alerted the SEC at the time it discovered the systems problem in a program designed to rebalance asset allocations in the selected customer accounts," said Vanessa Wilson, an analyst at Deutsche Bank Securities. "We view this as an unintentional mishap that is not uncommon with complex financial products."

There also is a distinction. The SEC-related problems at New England Securities are being blamed on a software glitch. Companies such as Freddie Mac and Tyco International have been battered by accounting problems.

"The issue is a systems issue, and not an accounting issue," said Liz Werner, an analyst with Sandler O'Neill & Partners. "We see limited downside risk in the shares."

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